Mexican All Soul's Day skeletons adorn high, ocher walls as if peeping at the menus of patrons below. In keeping with a trend that has been building across the Southwest and beyond since the mid-1980s, the appetizers, side dishes, entrees, and even desserts are increasingly laced with diverse combinations of chile: red-brown poblano, sweet habanero, smoky chipotle, piquant pequin, fleshy serrano.

"Chile is hot, no pun intended," says Mark Kiffin, head chef of the Coyote Cafe, which has been called the nation's leading exponent of chile-spiced cuisine. Led by the demand for true American cuisine, for lighter foods, for versatility and plain old diversion, chile has become a $3 billion business in the United States.

"Americans are finally catching up to the world," says Dave DeWitt, editor of Chile Pepper Magazine, a bimonthly with a circulation of about 80,000. In recent years, Americans have traveled more within and outside the country, raising their level of consciousness about non-European-based cuisines, says Mr. DeWitt. The influence of changing immigration patterns, especially in the Southwest, has brought increasing percentages of Mexican, Central, and South Americans who are bringing both new demand and new

twists on spicy, Latin American cuisine.

There is also more global awareness and sophistication by home cooks, who are taking advantage of thousands of ethnic cookbooks that have flooded the market over the past decade.

"Once the momentum of all these influences gets going, they begin to snowball and feed upon each other," says DeWitt. But the move to chile is not a fad, he says. "The history of cuisine shows that once a population shifts to spicier cuisines, they never go back."

Actually, chile is far more than just hot. [See story at right.] It can be alternately sweet, pungent, salty, astringent, bitter, and sour. As evidence that chile is where the American palate is headed, Chef Kiffin points to statistics that show salsa (main ingredient: chiles) surpassed the all-American ketchup by $40 million in sales last year. According to Time magazine, that makes it the country's most popular condiment. Statistics from the US Chamber of Commerce show that chile imports have tripled s ince 1988 from $12 million to $36 million.

That demand is being sparked by other well-known Southwestern restaurants spicing up the American palate: New York City's Rosa Mexicano, Dallas's Mansion on Turtle Creek, Cafe Annie in Houston. But the leader of the pack, by most accounts, is the Coyote Cafe, and its new sister in Washington, Red Sage. Both restaurants were founded by chef and chile expert Mark Miller.

Last month, Esquire magazine named Red Sage the country's best restaurant of 1992.

"Mark Miller and the Coyote Cafe have transformed the traditional cuisines of traditional Amerindian and Latin America - beans, corn tortillas, and meat-filled burritos and tacos - with the classical knowledge of reduced sauces and the high-gourmet considerations of subtle cooking," says Judith Hill, food critic for the Albuquerque Journal North and author of a new Berlitz guide to New Mexican restaurants. "His cuisine is introducing a whole new generation of restaurant owners and goers alike to the incr edible variety and subtlety of chiles."

Born in Boston, Mr. Miller studied Chinese art and the history of culture at the University of California at Berkeley. Teaching himself to cook by studying books by celebrated chefs James Beard and Craig Claiborne, he worked at Williams-Sonoma before landing a three-year stint at Chez Panisse, where he helped create 500 new dishes.

In 1979, he helped pioneer mesquite cooking while integrating non-European elements at his own restaurant, the Fourth St. Grill, in Berkeley. In 1980, he opened another famous Berkeley hangout, The Santa Fe Bar and Grill, where he concentrated on Louisiana-style and Southwestern food. He credits other non-Southwesterners with helping him put modern Southwestern cuisine on the map: John Sedlar and Steve Garcia at St. Estephe in Manhattan Beach, Calif.; Brendan Walsh at Arizona 206 in New York; John Makin,

Dean Fearing, and Amy Ferguson in Dallas.

"This is really the food of America," says chef Kiffin, who took over Coyote Cafe two years ago when Miller left to establish Red Sage. "It's not French or Italian or European leftovers - it's indigenous." A graduate of New York State's famous Culinary Institute of America (CIA), Kiffin is also a veteran of several top restaurants. Miller says he chose Kiffin for being well-versed in what the Coyote stands for: deep knowledge about the history and culture of the West and the classical food training to in terpret it for the palate.

To keep informed, Kiffin, restaurant manager Dave Hoemann, and others make frequent trips to Mexico and other Latin American countries as well as less frequent trips to Asian countries such as Thailand, the Philippines, China, and Japan. One recent trip included spending several days with Patricia Quintana, considered the best chef of Mexico, as well as trips to local villages.

"In small, out-of-the-way villages, you learn the age-old methods of deriving every bit of flavor out of food," says Kiffin. "That means smoking, grilling, toasting over open flame or in cast iron instead of the usual electric burner or aluminum pan."

This month Kiffin and Miller are releasing, "Coyote's Southwest Pantry," a new book with 125 recipes geared for the American home chef who's strapped for time. The cookbook will draw on experimentation, which is the order of the day at Coyote Cafe. The restaurant has dozens of local farmers who grow and test several varieties of chiles. Frequent contests, and informal get-togethers among so-called "chile heads" allow them to test new recipes.

"Chiles do well at 9,000 ft. with cool, dry air," says Kiffin, of Santa Fe's desert climate and high altitude. The drier climate keeps local varieties sweeter than those in more humid climes such as Venezuela, where the world's hottest, habaneros, are grown.

Kiffin says the rise of modern, Southwestern cuisine parallels a rise in regional cooking country-wide that is focusing on both American-trained chefs and locally produced raw foodstuffs.

"Maine and the Pacific Northwest are developing their own seafood, and California and the South are doing their own thing," he says.

But critic Hill says no one has fostered such regionalism as Miller, Kiffin, and the Coyote. "It is fair to say that Mark Miller has changed the way that restaurants all over the country think about developing the locally produced, fresh foods they already have."

Miller considers the growing interest in Southwestern cuisine more than a fad and more than a trend. Besides purely aesthetic and nutritional reasons is the number of Hispanics in America - they will double from 9 to 18 percent in 50 years. By 2020, Hispanics will be the largest US minority.

He predicts the current surge to continue apace for another decade before Southwestern cuisine establishes itself as a permanent rather than alternative cuisine.

"We're not really doing anything new," confesses Miller. "We're merely rediscovering the depth of a cuisine that has been around for thousands of years, and recombining its elements for the future."